SCHLUMBERGER

SCHLUMBERGER. Schlumberger, with headquarters in New York, is a complete oil services company which has become a transnational, high-technology leader in oil exploration and wellsite and drilling services in the oil and gas industry. The world's eightieth largest company in 1992, Schlumberger is highly diversified, with operations in over ninety-seven countries. Schlumberger's main operations involve drilling, testing, completing, pumping and cementing wells. Its Measurement and Systems Division is the world's largest manufacturer of meters for gas, water, and electric utilities, while other components produce computer-aided design and manufacturing systems or build devices for nuclear and military projects. Subsidiaries have included Fairchild Semiconductor, Dowell Schlumberger, and Sedco Forex, which was the world's largest oil-drilling company in 1982. In 1981, the company logged over seventy percent of the world's oil wells. Schlumberger is noted for its decentralized management style and the autonomy extended to its field engineers. Dedicated to research and development, the company hired one percent of all American college engineering graduates in 1981. In 1992, the company employed over 51,000 people, including over 103 nationalities, and earned over $661 million in profits on more than $6 billion in revenues.

Schlumberger was founded as the Société de Prospection Electrique by brothers Conrad and Marcel Schlumberger and their father Paul in 1919. Paul Schlumberger was a textile manufacturer and early investor in the Suez Canal, and his wife, Margueritte de Witt, headed the International Woman Suffrage Alliance after World War I. The brothers' great grandfather, François Guizot, was the Prime Minister of France from 1840 to 1848 during the reign of Louis Philippe. Conrad, a World War I veteran-turned-socialist, received a physics degree from the L'École Polytechnique de Paris and became a scientist and inventor, while Marcel studied civil engineering at L'École Centrale des Arts et Manufactures. Conrad's theory that the earth's subsurface could be charted by measuring the electrical resistivity of rock formations led to the 1919 partnership wherein his father agreed to provide up to 500,000 French francs to initiate the venture. Paul, who wrote the original agreement, laid the foundation for the company's long-term, non-financial focus. "In this undertaking, the interests of scientific research take precedence over financial ones." Yet, despite proving that electrical charting could reliably locate subsurface deposits of iron ore, copper and oil reservoirs, the partnership struggled to find companies interested in the new technology.

Initial business success came in 1927 when a director of the Pechelbronn Oil Company in Alsace, France, hired the Schlumbergers to find oil. Conrad hired his son-in-law, Henri Doll, to develop a tool that for the first time in history could map the shape of an oil reservoir, the quantity of oil in the well, and the optimum location from which to drill from electrical readings. In 1927, after successful measurements had been taken, Doll produced the world's first "wireline log." Flush from their success, Marcel and Conrad expected to find other contracts more readily, but it was not until 1929 that they signed their first major agreement to search for oil with the Soviet Union. Entry into the United States market came in 1932 when a request from Shell Oil to run logs in California and on the Texas gulf coast led to business from wildcatters in Texas and Oklahoma. In 1934, the brothers founded a new firm in Houston known as Schlumberger Well Surveying Corporation, soon the most profitable component of the parent company's international business. After Conrad died in 1936, Marcel Schlumberger led the company. Schlumberger's most profitable division, North American Wireline Operations, was established in Houston in 1946 and led by Pierre Schlumberger, Marcel's only son. Doll formed Electro-Mechanical Research at Ridgefield, Connecticut, to work for the Allied war effort, and there invented an induction log which measured subsurface resistivity using electromagnetic waves. In 1945 Schlumberger purchased Doll's firm, making him the head of company technical research worldwide. When Doll retired in 1967, forty percent of Schlumberger's revenues could be directly traced to his inventions.

Former banker John de Menil, the husband of Conrad's daughter Dominique, remained in Paris but controlled the firm's South American and Middle Eastern wireline operations from the Houston office. European operations were run by René Seydoux, Marcel's son-in-law. Marcel Schlumberger had begun to work with John de Menil to move the corporation from Paris to Trinidad during World War II, but died in 1953. In 1956, the lack of a clear leader to replace him and a need for central planning and coordination among the four divisions led to the formation of Schlumberger Limited as a parent company for Schlumberger operations. Pierre Schlumberger was named president, and Doll was elected chairman of the board. Pierre moved the company's headquarters to Houston, incorporated the firm in Curaçao for tax purposes, listed the new company on the New York Stock Exchange in 1962, and announced that Schlumberger family members would no longer be given preference within the company for promotions. Expansion began in 1959 with the acquisition of Forages et Exploitations Pétrolières (Forex), later the world's largest oil drilling company, and with the acquisition of Daystrom in 1961. Pierre resigned in 1965, and Jean Riboud was named president and chief executive officer of Schlumberger, Limited. Riboud was born to a French banking family in Lyon, France, graduated in 1939 from L'École des Sciences Politiques, and began working for Marcel Schlumberger in 1951 as a financial assistant. After helping to merge the four independent Schlumberger divisions into Schlumberger, Limited, he was named general manager in charge of Schlumberger operations in Europe and the eastern hemisphere in 1959.

Under Riboud, Schlumberger diversified while maintaining its oil industry focus, reorganized around product lines rather than geography, and moved its headquarters to New York City. In 1970, Schlumberger purchased the Compagnie des Compteurs, an electrical meter manufacturer, and in 1979 the company purchased Fairchild Camera and Instrument Corporation. Under Riboud's direction, Schlumberger enjoyed more than two decades of uninterrupted growth. As oil prices rose in the 1970s and early 1980s, increasing oil exploration and drilling required more and more of Schlumberger's services. The dominance of Schlumberger's Wireline Services Division in oil drilling has been compared with that of IBM in the computer industry. Field engineers' ability to interpret signals from electrical probes dropped into prospective wellholes to determine if the well held sufficient quantities of oil to produce a profit was estimated to save the oil drilling and exploration industry thirty-five to eighty billion dollars annually. In 1982 the company earned a record $1.3 billion in profits, making it the most profitable of the world's 1,000 largest corporations. In 1985 the company acquired SEDCO, another drilling company, and later GECO, a seismic firm.

In the mid-1980s, as oil prices plummeted, so did Schlumberger's revenues and profitability. By 1985 Riboud was forced to resign. Michel Vaillaud replaced him as chief executive officer, but lasted only one year as the company's profitability continued to deteriorate. In 1986, Vaillaud was replaced by D. Euan Baird, who was born in Scotland and the first non-Frenchman to lead the company. The same year, Schlumberger incurred a $2 billion loss, the first in more than twenty years. Baird began his career with Schlumberger over two decades earlier in the oilfield services division. As CEO, he refocused Schlumberger around its strengths in the oilfield industry. He sold Fairchild Semiconductor Corporation and other smaller businesses, invested $500 million to develop the company's oil-exploration technology, and initiated a $2.2 billion stock buy-back. In Texas, Schlumberger is associated with its 438-acre Austin Systems Center, designed by Howard Barnstone and established in 1987 to design and develop advanced computer systems. Other Texas research, engineering, and manufacturing centers include the Schlumberger Laboratory for Computer Systems in Austin, Vector Cable in Sugar Land, Schlumberger Perforating and Testing in Rosharon, and in Houston the Schlumberger Well Services, Anadrill, GECO-PRAKLA, and the Menil Collection, founded by Dominique de Menil and opened to the public in Houston in 1987.

BIBLIOGRAPHY:

Ken Auletta, The Art of Corporate Success: The Story of Schlumberger (New York: Putnam, 1984). Business Week, July 9, 1990. Forbes, October 30, 1978. The International Directory of Company Histories (Chicago: St. James Press, 1988-). Anne Gruner Schlumberger, The Schlumberger Adventure (New York: Arco, 1982).

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